Andy Kamashian joins David and talks about the pricing trends they’re seeing on metal fabricating equipment at Southern Fabricating Machine Sales during the Covid-19 pandemic.
About this segment of Blackbird TV
Recorded: May 25, 2021
Published: June 15, 2021
Joining me on this segment is Andy Kamashian, he’s the President of Southern Fabricating Machinery Sales just outside of Tampa, Florida. David, thank you for the opportunity, I appreciate it. I’m curious what you’re seeing in the metal fabricating space right now relative to just the marketplace. But first, if you could explain what’s the difference, you know what is metal fabricating and how does it differentiate from other, you know, manufacturing of metal products? Metal fabricating is generally described as manufacturing from a sheet or rolled sheet of materials. Unlike other fabricating process that might be machining, drilling, tapping, and removing metal through use of a cutter, mostly with metal fabricating, we’re going to be starting with a flat sheet or structural member of metal and forming that into shapes to be used for other things like enclosures, boxes, covers, pans, typically large flat objects. In a real simple sense, if it’s making chips, it’s machine tools. If it’s not making chips, it’s metal fabricating? In a simple sense, that’s correct. So what are you seeing right now in in the equipment space relative to supplies, demands and pricing? 2020 was a very interesting year at a lot of different fronts. We expected—as the pandemic hit—to see quite a bit of reduction of everything. A reduction of manufacturing, reduction of machine tool sales, and in an excess, we saw just the opposite. We saw an increase of manufacturing. We saw increased demand for machine tools, and although there was a very coagulated year in terms of machine tools sales, it was not what we expected at all, and as we came out of 2020, we rub the crystal ball looking into 2021 and beyond and some new things began to emerge that we saw, and some of those things were very interesting, as as had been side effects of the pandemic, there was a chip shortage, so as the chip shortage took effect, we saw some things happening in early 2021 of shortages of chips to the automotive market. That was the first hit that people could see. All those chips are in a lot of other things that consumers use, and industry uses as well, including machine tools and again rubbing that crystal ball looking forward, we’re seeing that or suspect that there’s going to be a shortage of those chips or chipsets for the machine tool industry. towards the end of 2021. Firstly, that should drive up demand for the used equipment on the market. At least that’s what we see now. Not just demand, but pricing as well, correct? Correct? The increases that I’m seeing are across almost every segment that you can think of in the economy, I’ve interviewed a lot of people here and the chip shortage is a latecomer to this phenomenon, and you had indicated earlier in your 2020 crystal ball that the pandemic acted in ways that we really didn’t anticipate. Can you just elaborate on that a little bit? Well early on in 2020 when it first hit, you know everybody talked about a shutdown and shutting the economy down, and I think everybody probably saw the worst in that. Shutting down manufacturing, shutting down shipping, shutting down everything would just put the economy on a complete standstill. How long we would be down and how long it would take to recover from that really remained anybody’s best guess we likened it to diving in a deep pool. We didn’t know how deep we’re going to go. Did not know how long we were going to be under. We hoped that we get out of the other side with a breath left and looks like fortunately we have, but there’s still a lot of remaining effects that are still lingering on that I don’t think anybody could have predicted last year. Yeah, and the predictions that I made have historically gone in the opposite direction, if not awfully close to 180 degrees, it’s it’s pretty close, and it’s been astounding to live through it. From from a supply chain perspective, things are still backed up, and with this chip shortage coming in and train wrecking new manufacturing, the impact on the used market, as you indicated, is going to have an upward swing on pricing. So our customers at Blackbird are primarily secured creditors and banks, and we work with bankruptcy lawyers. And I’m dealing in the world of collateral. This is a good impact on existing collateral. Is that true? Well it can be. It can be as prices go up for resale of equipment, but then also right behind that is the cost of that equipment goes up, so as we’re as we’re buying used equipment for resale or offering that equipment through means of brokerage, the equipment value goes up. There’s a lot of demand for later model equipment, so it’s it’s a little bit of a double-edged sword there, and hopefully the chip shortage doesn’t last too long because there’s only so much inventory out there, so it should create hopefully a good bubble of demand for the used equipment, but if it lasts too long it may end up, you know, hurting in the long run. Absolutely. And as we know from being the old guys in the room, bubbles do pop, and these pendulum swing in both directions and my concern now is that the strong pricing now might turn out to be really weak pricing in 18 months, but I’m not going to make that an official prediction, but just something that we should probably be aware of as appraisers and as people that are dealing with collateral and with used equipment absolutely. Andy, I do appreciate your time today and your insight into these markets, and particularly into metal fabrication equipment. Thanks for your time. Thank you.